Modernizing the transportation network

Economic benefits from modernizing the transportation network

Bianchi and Giorcelli, in this paper, try to evaluate the effect of modernizing the transportation network on the economy by studying the most recent episode of large-scale reconstruction of public infrastructure in European history. Specifically, they looked at the impact infrastructure spending, financed by the Marshall Plan, had on the Italian post-war economy. They find that infrastructure modernization increased technology adoption in the agricultural sector and contributed to the expansion of the industrial and service sectors in Italy.
Reconstruction Aid, Public Infrastructure, and Economic Development
Authors: Nicola Bianchi, Michela Giorcelli
From: Northwestern University, UCLA

Who should finance it?

Fay and al. develop a model where infrastructure private funding and government subsidies are endogenously determine. They find that the desirability of private finance for infrastructure follows an inverse U-shaped pattern, peaking up for countries in the upper-middle income range. They argue that in developed countries private financing should not be considered as the sole way to modernize infrastructure. Policies aimed at improving the business environment could improve the public sectors’ ability to raise taxes and spend efficiently.

Funding and Financing Infrastructure – The Joint-Use of Public and Private Finance
Authors: Marianne Fay, David Martimort, Stéphane Straub
From: World Bank, Paris School of Economics, University of Toulouse